This post discusses the common types of underwriting levels, impact from competition during detariff and some thoughts and expectations on the detariff market.
UNDERWRITING SOPHISTICATION
1. Spectrum of underwriting ranges among case underwriting, portfolio underwriting, and premium rating.
2. Premium Rating - Uses results at portfolio level to decide rates.
3. Portfolio Underwriting - Underwriting by the use of information at portfolio level.
4. Case Underwriting - Underwriting on the merits of each risk.
IMPACT OF COMPETITION
1. Improvement in claims management
2. Lower rates without basis
3. Underwriting Innovation
4. Align distribution to target markets
5. Emphasis on Management Information
6. Refinement in rating
MANAGEMENT INFORMATION THOUGHTS
1. Does current performance reports reflect historical business decisions?
2. Can we develop an indicator of expected future profitability of the business for personal lines business?
3. Is market segmentation a practice in the organisation?
4. To what extent is distribution aligned to target profitable segments?
5. How does current management information facilitate the above process?
6. As an industry, where are we on the underwriting spectrum?
FORESEEABLE TREND AFTER DETARIFF
1. With segmentation, more discounts to the good risks will be available.
2. As underwriters compete for favourable risks, there will be a greater push to find unexplored niches.
3. There will be a short time when pricing gives competitive advantage and subsequently turning into a red ocean.
